Commonwealth Bank’s board was so dissatisfied with the performance of its former chairman David Turner that it asked him to return 40% of his annual fees. However Turner refused and the board moved on, and the incident was kept secret from shareholders.
The banking royal commission has also heard that the minutes of CBA’s board meetings do not necessarily record everything discussed by board members “verbatim”. Questions were raised regarding significant matters that were not recorded on the minutes.
CBA’s current chair, Catherine Livingstone, also conceded that since 2011, senior executives have only had their short-term remuneration reduced for a “risk-related issue” if the issue became public.
She defended the decision to appoint Matt Comyn to replace Ian Narev as CBA’s chief executive, saying even though Comyn had been the head of CBA’s retail banking arm when it mis-sold consumer credit insurance, “to find an external person globally at that level who has not been involved in some regulatory event is almost impossible”.
The banking royal commission turned its attention to the remuneration framework employed by Australia’s major banks.
Livingstone, who became CBA chair in 2017, told the commission that following a highly critical report from the Australian Prudential Regulation Authority (Apra), which identified serious shortcomings at CBA and pointed to serious problems with CBA’s board, the board asked its former chair Turner to return 40% of his annual fees from his last year.
But Turner refused, she said, saying he didn’t agree with Apra’s assessment of the board’s performance. She also conceded that CBA did not tell shareholders about the incident in its final year financial report.
Senior counsel assisting the royal commission, Rowena Orr QC, asked whether the request should have been published.
Livingstone replied: “Well, I suppose I didn’t consider at the time including it, and maybe I should have.”
Orr said: “Well, could I ask you to consider now whether that’s a message that you think should be sent publicly, that you made a decision as a board to request the former chair to return 40% of his fees?”
Livingstone replied: “In – in retrospect, yes, perhaps we should have made that public.”
Livingstone told Orr that she knew she was putting her professional reputation at risk by joining CBA’s board, given the myriad scandals engulfing the bank in recent years, but she was determined to change the board’s culture.
Even so, she conceded since 2011, senior CBA executives had only had their short-term remuneration reduced for a “risk-related issue” if the issue has become public.
Orr asked Livingstone: “What message do you think it sends?
Livingstone replied: “Well, clearly, that there will only be consequence if there is a public event, a media event.”
Livingstone told Orr that the minutes of CBA’s board meetings do not necessarily record everything that is discussed by board members.
Orr asked: “Do you understand that a failure to comply with the requirements in relation to the keeping of minutes under section 251A of the Corporations Act is an offence?”
Livingstone said: “I am.”
The commission also heard from Brian Hartzer, Westpac’s chief executive, who discussed the millions Westpac has had to put aside to repay customers who were charged fees for services that were never provided.
At one stage, Hartzer had a tense exchange with senior counsel assisting the royal commission, Michael Hodge QC, about commissions paid to car dealers to encourage sales.
Hartzer was asked whether he thought car dealers affiliated with Westpac would sell insurance products to those who could not afford them out of a desire to collect the commission or from misguided altruistic motives.
Hartzer replied: “I couldn’t say. I’m not a car dealer.”
He had another go at answering the question, after Hodge accused him of being flippant.
“Sorry, we absolutely have an obligation to think about the controls that need to be in place for car dealers in this position, given that they are representing us in providing that finance, and we’ve made a number of improvements to those controls since that time to address that issue,” Hartzer said.
Re-disseminated by The Asian Banker from The Guardian